Even though DVDs have been around for only 15 years, the market is already under serious threat from online sales and piracy. Blockbuster in the US filed for Chapter 11 bankruptcy in 2010, while its UK arm has been up for sale for several years with no prospective buyers and has been forced to close branches across the country. It's not just the rental market that has been hit, either. Retailer Zavvi was forced into receivership two years ago, and HMV recently announced that it will be closing 40 of its UK stores due to a drop in profits.

It's clear the high street is suffering when it comes to entertainment sales, so where does that leave the convenience channel? According to research by HIM almost half of 18- to 24-year-olds surveyed (44%) would be encouraged to visit more often if a store offered DVD rentals. The British Video Association also recently reported that video (the catch-all term for DVD, Blu-ray and On-Demand) sales and rentals in 2010 were at the same level as the year before, confirming that the demand is there, but rather the delivery method hasn't been correct.

The traditional method of DVD rental and sales has been eclipsed of late by postal services such as LoveFilm, which has amassed more than one million users in six years, and other technology-led routes. Download-to-own sales have more than doubled from £35m to £78m, while downloadable rental-style services grew in value by £5m to £205m last year, according to the British Video Association. Illegal downloading has also had an impact, with the Federation of Copyright Theft estimating that piracy costs the film industry more than £400m a year.

Entertainment technology is constantly evolving less than 10 years ago video cassettes dominated the film market. So should retailers be looking to the next stage? Robinson says that Blu-ray will eventually become more popular than DVDs, but progress has been slow. "While DVD is our main focus, Blu-ray is expanding and currently makes up 10% of our turnover," he says. "Games are something we're looking at for the near future." 

Leszczyszak agrees that Blu-ray is the next step for entertainment, but says that it needs to be monitored before retailers decide to throw away their DVD selection. "Interest in Blu-ray is rapidly expanding, and we offer Blu-ray rentals across a select range of DVD kiosks," he says. "Our live inventory reporting system allows them to see peaks in demand, and weekly customer correspondence allows us to speak with our users to determine whether they want new additions such as Blu-ray movies." 

Leszczyszak adds that Movie Booth is currently investigating new ways to bring movies to consumers through kiosks. "We've developed a way to install a USB port on our machines that will allow consumers to copy a film onto a data stick for purchase," he says. "As soon as there is a consumer demand for this, we'll be ready. It's just another way of investing in the sector and believing that it will thrive," he says.
With fewer people renting DVDs from shops, many c-store retailers are questioning whether it's worth stocking them. Dave Newman, who runs Westhill Stores in Hastings, East Sussex, believes it may be time to hit the stop button on rentals in his store. He has a freestanding display, but isn't sure if it justifies the space.

"Originally, it was a great way to bring more people into the store and quite lucrative as customers would buy more products when they rented a film, but in the past 18 months the demand for it has reduced," Dave says. "I need to take a hard look at whether it's still worth stocking them as I may even be running at a loss, and that space could be better utilised."

Dave believes that the increase in popularity of downloading together with piracy has hit the market hard. "If there was a way to clamp down on piracy then I think there would be more demand for new release DVDs," he says. "When DVDs first came along, there was a huge demand from my customers, but now my customers are offering me the films even before I get them."

Del Benney, who runs Harston Stores in Cambridge, also claims that sales aren't as strong thanks to new methods of distribution. "I have a DVD display and have noticed a downturn in demand in recent months," he says.

David Robinson, managing director of DVD distributor The Webb Group, says that traditional displays are a thing of the past. "With the sector becoming more competitive and with space at a premium, many retailers feel that they can't justify the two or three metres that a display takes up and are replacing them with food to go or additional chillers."

Not everyone agrees, however. Mitchell Leszczyszak of the Movie Booth claims there is still demand for an in-store DVD offering. "Download technology isn't consumer friendly at the moment," he says. "Physical rental of movies in the UK remains the primary choice for most movie-lovers. While the online market is developing, most people still prefer the benefits offered by physical rental solutions a wide range of titles, low prices and instant access."

While the DVD category may not justify shelves-worth of room, interactive DVD kiosks offer retailers a space-efficient solution that adds footfall and sales.

Spar grocery trading director Mark Keeley is a kiosk enthusiast. "We encourage store owners to have an offering, especially in new builds and refurbishments, as it's something different for consumers," he says.

The Rent It Here touchscreen kiosk has seen good uptake since it was launched by the Webb Group in 2010. The system, which takes up just 0.2m on the shop floor, offers a 20% share of rental revenue generated and has already been installed in 150 stores.

Neil Thakkar of Nisa Local in Leicester invested in a Rent It Here kiosk at the start of 2010. He opted for this over a traditional DVD display as he didn't want to take up too much space in the store, but recognised the potential of the category. "The display unit is quite small so we didn't have to sacrifice anything else to fit it in, and the actual DVDs are stored behind the counter where they're safe," he says.

"Even though there is a Blockbuster in the town centre, it is extremely popular as people can do their shopping and pick up a DVD while they're here," he adds. "We get a 20% share of the revenue on the kiosk, but the fact that when customers look for the nearest DVD stockist on the Rent It Here site our store comes up is invaluable. It means they will come to the store once to rent and again to return the DVD. I've seen quite a few customers who have come for DVDs only at first, but now shop here for other products."

Donagh McGoveran of Centra on Malone Road in Belfast installed a Movie Booth DVD kiosk in an effort to capitalise on the local student population. "We installed it because it suits the area as most of the students are in rented accommodation and don't have satellite TV," says Donagh.

He prefers the kiosk option to a traditional display as it requires less upkeep and he can sell additional products such as snacks and drinks, stationed close by it. "It takes very little management on our part and brings in a lot of customers," he adds. "The return is solid and it definitely justifies its place in the store."

Leszczyszak claims that Movie Booth kiosks can be lucrative for store owners. "Most retailers will receive a healthy share of profits generated from the kiosk on a monthly basis, dependent on the level of use the kiosk receives while in-store," he says.

"But perhaps of even greater benefit to the retailer is the added footfall and secondary spending the kiosk can bring, as well as the buzz generated from having a unique concept inside their store," he adds.

Box office hits

As well as the delivery format, another factor that plays a major role in the success of a DVD category is, of course, the product range. Keeley believes that there is an opportunity for stores to offer titles that may not be offered by others. "Ranging needs to be correct for DVDs to be successful. Convenience can be a great outlet for movies that may not have done well at the box office, but that the production studio needs to make money on," he says.

DVD and Blu-ray distributor MSE head of category management John Garner agrees that range is crucial. MSE researches localities near convenience stores and assesses which titles perform best. "It varies greatly from area to area; stores close to schools will do well with children's titles, whereas stores in cities or near to universities will sell more adult and comedy titles," says Garner. "But it's important to get the balance right. Even though one area is more likely to sell a particular genre, you can't ignore others so you need to have a small selection to suit other tastes."

Robinson says that through the Rent it Here system retailers can stock about 400 titles which are reviewed on a regular basis so that they can supply the latest films on the market. "We check what titles have been performing well in a store, and if a particular title hasn't been rented out in some time we remove it and use it in another store where there is a demand," he says. "The retailers also get new titles as they're released and if there is a huge demand from customers for a particular title or genre we'll do our best to stock it. In some stores Bollywood is popular so we're offering a larger range of those titles."

So before you eject DVDs altogether, remember that with the right format and a range that suits your customer base, a DVD offering has the potential to not only justify its place, but provide another reason to visit your store.